Audit Notes: Student loan profits, paywall incentives, postal banking

The Huffington Post on a government bonanza

The Huffington Post’s Shahien Nasiripour comes up with a great angle on news that the Education Department expects to make $51 billion in profit this year off student loans:

Exxon Mobil Corp., the nation’s most profitable company, reported $44.9 billion in net income last year. Apple Inc. recorded a $41.7 billion profit in its 2012 fiscal year, which ended in September, while Chevron Corp. reported $26.2 billion in earnings last year. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $51.9 billion in profit last year.

It’s outrageous that student loan interest rates—in a bad economy where recent graduates struggle to find jobs, much less ones that give them raises and the like—are as high as they are when other interest rates are as low as they are, something Senator Elizabeth Warren has spotlighted recently. Nasiripour:

But as the Federal Reserve attempts to lower borrowing costs for everyone from households and small businesses to large corporations and Wall Street banks, student borrowers have not been able to benefit.

Compared to a benchmark interest rate — what the U.S. government pays to borrow for 10 years — student borrowers have never paid more, increasing the burden of their student debt as wage increases and yields on investments and bank accounts fail to keep up with the relative increase in student loan interest payments.

This ought to be a bigger story.

— Former Wall Street Journal digital editor Alan Murray, now president of the Pew Research Center, gives a presentation on digital journalism that’s well worth watching.

He says that paywalls not only can bring in desperately needed revenue, but they focus news organizations on doing journalism that has value, something The Audit’s Dean Starkman has argued.

Watch Murray’s brief speech here:

— David Dayen makes a solid case in Pacific Standard for allowing the US Postal Service to offer simple banking services, both as a way to bring in new revenue and as a competitor to predatory lenders:

According to the FDIC’s 2011 National Survey, over 10 million US households are “unbanked,” with no access to the financial system. Another 24 million households are “underbanked,” meaning they have a bank account but they also rely on providers of “alternative financial services”: remittance or money order shops, payday lenders, check-cashing operations, pawn shops, or associated services. Many of these services are among the most unscrupulous in American society, preying on people with few other options and charging usurious interest rates or carving out large fees. These roughly 68 million unbanked or underbanked Americans represent a huge market for non-bank financial predators.

In other countries, this market is served at the post office. Almost every developed nation in Europe and East Asia operates a postal banking system. A few have been privatized, including what was the world’s largest savings bank, Japan Post. And some operate as a private-public partnership. But countries like Israel, France, Switzerland, Russia, South Korea, South Africa and more all allow their citizens to perform simple banking tasks at the local post office. New Zealand’s Kiwibank, a recent innovation, was established in 2002 specifically to protect citizens from financial predators. It has been wildly successful, according to Ellen Brown of the Public Banking Institute, with one in eight Kiwis moving their services to the postal bank in the first five years…

There’s no question that the commercial banking industry and the fly-by-night non-bank financial predators alike would fight such a proposal in Congress, just as the banks did in 1911 with the original Postal Savings system, in an effort to rid themselves of any competition. And these operators are pretty adept at getting what they want out of Washington. But the Postal Service, which has been around since before we were a country, operates as a Constitutionally mandated public service for all Americans. Extending access to financial services for all Americans—especially those who are woefully underserved in the current market—would fit well with that mandate. And it would help solve the Postal Service’s current crisis as part of the bargain.

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